A farm financial model with leverage and investment in two farm enterprises is specified. The model is extended to incorporate futures hedging and the Separation Theorem is used to show that optimal hedging is zero. The assumption of a risk-free asset is relaxed and, while this leads to a violation of the Separation Theorem, the result that optimal hedging is zero is maintained providing that futures markets are efficient. It is concluded that if capital markets are efficient then farmers will have little interest in futures markets except to speculate.

There are four main objectives for success in reducing the problems from climate change by increasing the concern with a better understanding of more effective policies for sustainable development of ethanol production by cassava as an alternative energy source in Thailand. The first objective is to examine the agri-business systems of cassava production for producing ethanol as an alternative energy source and to identify types of smallholders who might decide to become involved in contract farming for cassava production. Participation in contracts under agricultural cooperatives in cassava production is based on verbal agreement between farmers and agricultural cooperatives and a written contractual agreement between agricultural cooperatives and ethanol processors. Four categories of smallholders were identified based on ownership of land and assets. The second objective is to evaluate the factors affecting contract farming. Results of examination using Linear Probability, Probit and Logit models show human capital, physical assets, production costs, credit access and agricultural groups are important factors in participation in contracts. Most wealthy smallholders face high transaction costs and hence they are willing to participate in contracting. However, lower-income smallholders, who also faced high transaction costs, were not interested in participation in contract farming. This might be because most of them were older and had lower levels of education. Thus, they might have difficulties adapting to contracting. The third and fourth objectives are to evaluate the effects of contract participation on outcomes.

This article evaluates a hybrid seed contract between Indonesian smallholders and Pioneer Hybrid International. A transaction cost approach was used to analyse contract participation, total farm gross margins and labour and chemical use. The empirical results suggest: (a) the contract favours farmers with more irrigated land; (b) the contract improved returns to farm capital and was welfare improving; (c) the contract increased the demand for non-family labour, particularly female labour; and (d) the contract increased the intensity of chemical use. The success of the contract was attributed to the nature of the contracting process, which was between Pioneer and grower groups and not individual smallholders.

A simplified version of the BEAM Rubber Agroforestry Model is embedded in a dynamic economic model to examine the impact of uncertainty about prices and climate on decision variables. Solutions, in terms of optimal levels for decision variables are found using a Monte Carlo stochastic framework. These solutions were used to derive risk-efficient frontiers corresponding to different levels of the decision variables. The results underline the importance of including uncertainty in dynamic bioeconomic systems since profits under uncertainty turned out to be quite different from those obtained with prices and climate assumed to be constant.

This paper presents some preliminary results from a larger ongoing project analyzing three farm contracts in East Java, Bali and Lombok. The primary purposes of the larger study are to examine the effects of the three contracts on welfare of participating smallholders, reasons for contract participation and identification of the implications of contract farming for government policy. Analysis of the data collected in the study has been completed for the East Javanese and Bali contracts, with preliminary results for the East Javanese work presented in Simmons et al. (2003). It was never our intention to pay particular attention to village farmer organisations associated with the three contracts, however after conducting our first smallholder survey in East Java it became apparent that such organisations were an important part of the story. The purpose of this workshop paper is to explain what we discovered about links between contract farming and farmer organisations from our three case studies. The first section of the paper identifies three types of farmer organisations associated with contract farming, the next section explains the ways that contract farming affects smallholder welfare, the next three sections are the case studies and the final section uses the case studies to discuss farm level linkages associated with contract farming and effects of contract farming on village organisations.

This article examines the emergence and benefits of contract farming in East Java, Bali, and Lombok, Indonesia. After a general review of contract farming in these regions, three contracts, for seed corn in East Java, seed rice in Bali, and broilers in Lombok are described and analyzed using key informant interviews and household survey data. A review of the contracts suggest that there is a wide array of contract types and this is related to the technical requirements of production and the associated costs. Probit analysis is used to identify factors contributing to smallholder participation in farm contracts and a two-stage estimation process used to measure the effects of farm contracts on gross margins and labor use. Results indicate participation in contracts is influenced by farm size and other factors such as smallholder's age, education, and participation in farm groups. Contracts increased returns to capital for the seed corn and broiler contracts but not for the seed rice contract. All three contracts influenced the types of labor used; however, none of them influenced total farm employment.

Agricultural development is seen as a necessary precondition for economic growth in most developing countries. There exists a large body of theoretical and empirical literature on the agricultural sector's contribution promoting growth and reducing poverty. Since many rural households in Sri Lanka depend directly or indirectly on agriculture, and given that the agricultural sector makes a considerable contribution to the overall economy, one might expect agriculture to be a key component of growth and development in Sri Lanka. Even though public policy towards the agricultural sector has not been consistent in Sri Lanka, it has attracted governments' attention and resources with the focus of development of the country and poverty alleviation. The purpose of this thesis is to quantitatively assess the effects of some key policies in the agricultural sector of Sri Lanka. In doing so, it employs a CGE model of the economy with a tops-down regional extension. The study adopted the most recent Input-Output table for Sri Lanka, namely, the 2000 table, as the main data source for the model. This study then examines the likely impacts of domestic agricultural policies on the economy at national level, its key industries and its main regions on a wide range of goals such as growth, employment, output and income levels. The policy interventions investigated include productivity improvement in agriculture, a complete liberalisation of prevailing agricultural tariffs and land expansion in agriculture. The results reveal that each policy considered in the study contributes positively to the GDP growth. The productivity improvement is likely to cause a negative impact on aggregate employment, while other two policies expand aggregate employment. Implications at industry level show that all three simulations stimulate not only the agricultural output but also industry and services outputs. Particularly, agricultural productivity improvement and land expansion seem to promote agricultural and food processing industries, and foster the growth of predominant agricultural regions of the country. At the industry level, a striking finding is that those two policies reduce the demand for agriculture-related labour in the short-run indicating negative income effects on agricultural households. Furthermore, the results suggest a slowdown in export-related manufacturing industries in the long-run as a result of liberalisation of prevailing agricultural tariffs and land expansion. Finally, the study recommends several appropriate policy responses based on these major findings.